tv Janet Yellen Testimony on the Federal Reserve System CSPAN December 7, 2015 4:15am-6:01am EST
from them, from the people of iraq or the people of afghanistan and pakistan. there are still people out there who are good who want the truth to come out who want us to be their ally again. and there are experts out here who can tell the united states how to accomplish these missions. but it's up to the administration and it's up to the lawmakers to say what that mission is and what that strategy is. because right now nobody knows. >> thank you. [applause] >> so we have a bit of time to open it up to questions. while we're doing that i have a couple of resources i want to mention that are available to you. one of them is shown on the side screens here, a very powerful analytical. interactive time line. we have a data base.
it's on our website. it's very powerful. particularly think the three things katie talked about if ou look at the nature of the terrorist against the united states it's all of the above. every tactic technique that could potentially be available has been aimed at the united states which is important when you think about countering that. when everybody has an easy button answer, seal the border or keep out the refugees or end the visa waiver program. none of these are -- the terrorists just move on to something else. so in your programs toupt be efficacious and have due diligence. but somehow the notion we put a plug in and the flood is stopped is a rally wrong way to do that. you'll do more damage in terms of freedom prosperity and own
security by fixating on something, if you just put my bumper sticker up there this problem will be solved. it's a powerful tool. mentioned today the report that we did the analysis of the administration counter terrorism strategy i still think that's a very important paper that i would commend to you. another one that lisa coauthored the report that we did that looked at the ideological element and political islam and how do you combat that which has to be paired with your counter terrorism strategy -- that's also available on line. the third paper with the great team that looks at the foreign fighter threat which is something that bruce and several others have reported on. to me it's shocking that we don't have a pipeline strategy. after all these years and the many times we've seen it. that paper will be out in the relative near future. having said that we're happy to take questions and we'll start
-- we'll start easy. we'll work our way back to the center. we'll get as many questions in the time we have available. for uess this may be katherine. how the discussion has been mostly about gun control and workplace violence. they're saying it could be terrorism. but it's interesting that that's not been at the forefront. >> i would just say first of all law enforcement and f.b.i. unfairly criticized for not coming out and saying it's terrorism. they need to know. maybe now today we do know. i think they've done everything right. i think the media was another problem the administration is another problem. i agree with you absolutely. to jump to guns as well as to jump to causes is really the
wrong way to go about this. and i think we've got big problems on our hands because of that. >> let me ask bruce to comment. this is a plot that is kind of different from anything we've seen before. any observations on what we've seen? well, personally, terrorism is a -- shooters like this are extremely rare, about 5% of all the mass killings have involved more than one person. but secondly, to have a husband and wife team is not completely unprecedented but is somewhat. the only other example i can think of is last year the husband and wife shooting in las vegas. the white supremacist related. here i think what has been reported and which
but why does it have to be either or? these things don't have to be necessarily mutually exclusive. people become terrorists for all sorts of reasons. generally at least the most common, the conventional wisdom is that there's some sense of injustice. motivates people to engage in workplace violence. could be deeply personal, could be an ideological motivation. i'm not sure we have to exclude. >> the other thing we have had an increasing number of plots in the last two years. to my mind this is the first plot that we've seen that wasn't almost exclusively home grown. it's been reporting at least of
some transnational connections. maybe -- the trouble is we often only pay attention to terrorism when tragically the blood is already spilled. when there's blood shed we pay attention. in my view the plts that the f.b.i. director talked about disrupted on july 4th just this year that clearly had an isis involvement that resulted in the arrests of upwards of ten individuals and publicly -- because i assume it is still under investigation. the details have not been released. we don't know exactly what the isis part -- but he clearly said there was an isis dimension of it. that failed. it was disrupted because i think the sophisticated abilities of the f.b.i. in lee cent years. the point is we forgot about it but that should have been a very important warning. >> there have been several attempted plots in the u.s. that have had international
connections. the may attempted car bombing. the man from pakistan, there were connections to the them. and then the plot, the new york subway plot. so there was also connections internationally to that attempt as well. >> katy. so we had another question down here in the center there. he gentleman behind you. >> thanks very much for the wide ranging presentation. especially sara's the and the former journalist and correspondent. i spent many years in the state department counter terrorism office and so i'm approaching this as a practitioner. i think one thing that may be overlooked is the offensive and defensive. in terms of the defensive, the training, for example, doesn't
really depend on the nomenclature of the slides of what you call up the swat teams we saw visibly yesterday and other types of training including that we provide to countries overseas. the -- doesn't really matter so much as the techniques et cetera. i think there's a little too much overemphasis on some quarters on the smantics on what the administration calls or doesn't call islamic fund training, for example, doesn't really depend on the nomenclature of the slides of what you call up the swat teams we saw visibly yesterday and other types of training including that we provide to countries overseas. the -- doesn't really matter so
much as the techniques et cetera. i think there's a little too much overemphasis on some quarters on the smantics on what the administration calls or doesn't call islamic fundamentalism. the other thing that's overlooked. president reagan following the bay route bombings and other incidents said terrorism is a crime -- it's fashionable to say one way to get rid of gun violence is improve mental health but here we have a situation where it looks like they would have never been picked up on the screen by mental health professionals. so there's the other aspect of how do you make it more difficult. >> i was going to respond to
the last point because this is one i feel very strongly about. the problem is the psychology angle has not yielded anything useful so far. and we're putting too much effort into that and we're completely ignoring the aspects that are valuable. so, for example, if you look at the cases of the isis just the supporters in the last 14 months, repeatedly you see sort of the appearance or behavior indicators of radicalization. we saw it in this case with san bernardino as well. we're ignoring that. the suspicious activities report list that law enforcement uses, they're not allowed to even talk about those aspects. so i would push back. i would say -- god bless the psychologists who want to keep pursuing it. maybe they will unlock something useful at some point. they haven't yet. and let's pay more attention to the other things that are of value and of use to law
enforcement. >> thank you. i've got a question regarding syria. re there any -- views that depend upon option that is haven't been yet leveraged to encourage president assad to step aside. > jim. >> ultimately as long as assad s in power that will only re downed to to their benefit. any long-term strategy for defeating isis there has to include removing assad from power. but i am not as optimistic as some in the administration appear to be about the prospects of having russia grease the skids under assad. they've been continually dropping hints apparently out
of the u.n. ambassador up in new york is continually saying, you know, we're not weded to assad. we need some kind of structure behind him. whereas the iranians are much more clearly supportive of assad. but i think these tend to be diplomatic winks of the eye kind of flirting to get u.s. buy-in for u.s.-russian broke dangered process that, you know, in the long run is needed but i don't think it's going to come about in the short run. was the mass shooting in san bernardino an act of war? and what are the conversations of victory? > suffice to see him in person
and not at home. well, i mean, i would bristle against -- i would bristle against calling it an act of war because that implies our enemy is a state. it may mean that our response has to be war like. certainly involved militarily depending on what the pedigree of the incidents if it turns out to be terrorism is in general. but i think the answer to terrorism is that we've swung in opposite directions. for the longest time until 2001 we've treated entirely criminal phenomenon. we know that. there's no police force in the world that could take on isis. there was none that could have taken on the taliban. but we have to use the tools to counter terrorism. i would say that san bernardino, whether it's terrorism or whether it's
workplace violence or some other justification is handled best in here as a law enforcement problem. but the difference is we still have to unravel what the background is. which raises lots of different implication that is go beyond criminality and beyond law enforcement that involves intelligence and international intelligence. if there was a process of radicalization. this morning, reported there was some contact with individuals overseas. that may account for the smashing of cell phones and deleting of files. then it goes beyond law enforcement. my earlier point, i don't think it's mutually exclusive. we have to approach it from both dimensions depending on the circumstances, the situation, and the perpetrators. actually, i think in recent weeks been france's approach with paris. been treated as both law enforcement and criminal issue but also as a military one. >> unfortunately, i think we're
out of time. we only have two things to do. one is i've asked our panelists and some other folks to join together in a private lunch in the davis room. if you exit and to down the hall, make another left. for everyone else we have sandwiches outside. we encourage you to stick around, discuss the issues that we talked about today. the only other thing we have to do is please thank our panel for joining us. [applause]
thank her for appearing before us. this committee has a long tradition of receiving regular updates and we're pleased to be continuing that tradition today. the u.s. economy has struggled through a long season of tepid growth. it's been six years since our last recession technically ended. and over that time our economy has grown at an historicically slow pace. some have suggested that a 2% growth rate is and will be the new normal for the economy. all of us should view these low economic expectations as unacceptable. the fed certainly has an important role to play in setting monetary policy and that is where its focus should be. thrl no doubt be discussion of fed policy and interest rates during today's hearing. as accommodative monetary policy by the fed has been the new norm now. however, we should be mindful that changing interest rates is
not a long-term prescription for achieving a more dynamic economy. unlocking the full potential of our economy will require policy decision that is incentivize the private sector, including better fiscal management of spending by the federal government as well as pursuing ro growth policies such as tax reform. and other policies, commitments. our commitment to addressing these -- and by our i mean the united states congress, not the federal reserve -- will go a long way toward creating certainty and confidence among both businesses and consumers. if we do not succeed in furtherering pro growth policies, we may face an economic future defined by low expectations and diminished standards of living. at the same time, questions arise regarding the impact of weakening economies in europe, china and emerging market countries.
this morning the european central bank announced that it's expanding its stimulus measures and taking its overnight deposit rates further into negative territory. china devalued its currency in august in response to financial turmoil and other major international trading partners face significant economic challenges. the actions taken by these countries will have an impact in the value of dollar and the u.s. economy. we look forward to hearing the chairman address that issue, also. these are some of the major issues we will discuss and i certainly look forward to hearing chair yellen's thoughts on this. there is global uncertainty also that i think we should add to this equation. too many morningings we tune in to breaking news or pick up the newspaper and find headlines that we don't want to read. that appears to be spreading cancer not only in the united states but also throughout the world. so the uncertainty that that levels and the impact it has on
economic policies is perhaps another issue that we ought to be discussing. this morning unfortunately the house of representatives has a series of votes coming up shortly. so there may be in and out of members having to deal with that as we are trying to wrap up our session. i am going to try to ask our members -- i will ask our members to try to keep their remarks to -- and questions to five minutes. if we need a second round we will try to accommodate that. and also try to accommodate those that have had to run out for votes and will come back. chair yellen, most of us sitting if not all of us sitting up here today would love to wake up to headlines in the "wall street journal," headlines in the "new york times," pictures on the front page of financial times, and i have all these things that highlight you this morning as the person of the day.
i don't expect that you have that same enthusiasm for waking up every morning but we are really pleased to have you here and look forward to your testimony. first i would like to turn to congresswoman mall ownie, our ranking member. and then ask mr. tiebery to take a minute or so to introduce himself as our new vice chairman on the house side. >> thank you so much mr. chairman. so welcome chair yellen. i am so pleased you are here today for this important and timely discussion. i look forward to your testimony in advance of the federal open market committees meeting at which you will decide whether or not to raise the federal funds rate. i am interesting in hearing your perspective on the following issues and others. what current trends do you find
most important in helping you assess the short and long term challenges facing our economy? secondly, how can the federal reserve tie future rate increases so we don't jeopardize the current economic recovery or hurt american families? thirdly, what do you think of the legislation recently passed by the house of representatives that would compromise the independence of the federal reserve? before i turn to these issues and others i think it's important to put this hearing in perspective. at the end of the bush administration just a little less than seven years ago we faced what former fed chairman bernanke called, the worst financial crisis in global history, including the great depression. " we have come a long way since economic crisis and that
progress is in no small part due to the bold actions by the nonpartisan nonpolitical federal reserve. in the month when president bush left office we lost almost 820,000 private sector jobs. over the past year we have gained an average of 226,000 jobs per month. in fact, we have added 13.5 million private sector jobs over a record breaking 68 onsecutive months of growth. i have this chart and i would like to put it in the record which explains and documents this growth. in october 2009 unemployment reached 10%. since then it has been cut in half. it now stands at 5%. there were about seven unemployed workers for every job opening in july of 2009.
now there are 1.4 up employed workers for job opening. the lowest this ratio has been since early 2001. real g.d.p. fell 4 pth 2% between the end of 2007 and the second quarter of 2009. but g.d.p. has increased by more than 14% since then. growth has been positive in 23 of the last 25 quarters. average home prices dropped 19% between 2007 and 2011. but now they're back up to 2007. about 17 trillion in wealth evaporated between the summer of 2007 and the beginning of 2009. all of those losses have been recovered and now total wealth is about 10 trillion higher than it was at the on sight of the financial crisis. the federal reserve played an
extraordinary role turning around the economy. rates kly acted to lower to almost zero and it's held them there to 7 years. and it's been a principal factor in our economic recovery. the fed did this in spite those who claimed it was on the horizon and who were later proven wrong. then having exhausted the conventional tools of monetary policy the fed deployed several rounds of quantitative easing keeping long term rates low and further stimulating the economy. these efforts pull our country out of the great recession but without the fed's actions things would be very different today. a recent study by economist blinder and mark zandy found that efforts by the federal reserve and the obama administration with support from democrats in congress dramatically reduced the severity and length of the great recession. specifically the report found
that without their joint efforts the recession would have lasted twice as long, the unemployment rate would have reached nearly 16% and we would have lost twice as many jobs more than 17 million american jobs. i would like to enter the blinder-zandy report into the record. ironically, republicans in congress made recovery more difficult. as former reserve chairman ben bernanke wrote in his new book, which i recommend, and i quote. the economy needed help from congress. if not for additional spending then at least in areas such as retraining unemployed workers. but the republican-led congress demabbeded deep spending can you tell us as a time when we needed aggressive policy to boost the economy. they ended up doing more to hurt than to help. and now republicans complain that the economic recovery has
been too slow. now they have gone one step further. two weeks ago republicans in the house of representatives passed, in my opinion, damaging legislation, the form act, that would fundamentally hamper the feds' ability to conduct monetary policy. it would hurt the feds' independence, for example, by forcing it to determine target interest rates using a math matcal formula. while ignoring a broad range of important economic indicators. chair yellen, as you have noted before, if it had been forced to follow such a rule in recent years, millions of americans would have suffered unnecessary spells of joblessness over that period. if the form act had been a law during the time of the recession, the federal reserves
would not have been able to take the aggressive steps needed to help pull our nation out of the greatest economic crisis since the great depression. i hope today that we can focus on the critical issues before us, how the federal reserve should act to strengthen our economic recovery. but if necessary we must show that efforts to ham string the federal reserve are misguided and dangerous. thank you for appearing before the joint economic committee today and i look forward to your testimony. >> thank you. >> thank you for your courtesy. i thank chairman ryan for giving me this opportunity and i want to thank you for your indiana hoosier niceness in this process. you and your staff have been great in welcoming me. i look forward to working with my colleagues from the senate as well as the house. i know we have in ohio at least so many challenges. a lot of moms and dads are
underemployed. yes, the unemployment rate has gone down but there is a tremendous amount of anxiety. i know in our state, about the future of the economy. and this is so important. thank you for your time today. we look forward to hearing from you. >> thank you. i would like to introduce our witness. janet l. yellen took office as chair of the board of governors on february 3, 2014 for a four-year term ending february 3, 2018. dr. yellen also serves as chairman of the federal market committee, the system's policy making body. prior to her appointment as chair dr. yellen serves as vice chair taking office in 2010 when she simultaneously began a 14 yoor member of the board that could expire in 2024.
professor emeritus at university of california at berkeley, professor of business and economics. has been a faculty member there since 1980. dr. yellen since 1994 served as member of the board of governors through february 1997. and then left the federal reserve to become chair of the council of economic advisers through august 1999. she also chaired the economic policy committee of the organization for economic cooperation and development. she serves as president and chief executive officer of the federal reserve bank of san francisco and has a distinguished academic background. we are pleased to have you here this morning. thank you so much for coming. this is an important time. you've had a busy week and we appreciate you taking the time to share with us your thoughts on where we are and where we're
going in this economy in the role of federal reserve. >> thank you very much. chairman coats, ranking member mall ownie and members of the committee, i appreciate the opportunity to testify before you today. in my remarks i will discuss the current economic outlook before turning to monetary policy. the u.s. economy has recovered substantially since the great recession. the unemployment rate which peaked to 10% in october 2009 declined to 5% in october of this year. at that level the unemployment rate is near the median of federal open market committee participants most recent estimates of its longer run normal level. the economy is created about 13 million jobs since the low point for em ployment in early 2010 and total nonfarm pay rolls are now almost 4.5
million higher than just prior to the recession. most recently, after a couple of months of relatively modest payroll growth employers added estimated 271,000 jobs in october. this increase brought the average monthly gains since june to about 195,000. close to the monthly pace of around 210,000 in the first half of the year and still sufficient to be consistent with continued improvement in the labor market. at the same time that the labor market has improved, u.s. economic output as measured by inflation adjusted growth domestic product or real g.d.p. has increased at a moderate pace on balance during the expansion. over the first three yaurters of this year real g.d.p. is currently estimated to have
advanced at an annual rate of 2.5%. close to its average pace over the previous 5 years. many economic forecasters expect growth roughly along those same lines in the fourth quarter. growth this year has been held down by weak net exports which have subtracted more than half a percentage point on average from the annual rate of real g.d.p. growth over the past three quarters. foreign economic growth has slowed, dampening increases in u.s. exports. and the u.s. dollar has depreciated substantially since the middle of last year. making our exports more expensive and imported goods cheaper. by contrast, total real private domestic final purchases which include household spending, business fixed investment, and residential investment,
currently represents about 85% of aggregate spending. it has increased at an annual rate of 3% this year significantly faster than real g.d.p. household spending growth has been particularly solid in 2015. with purchases of new motor vehicles especially strong. job growth has bolstered household income and lower energy prices have left consumers with more to spend on other goods and services. increases in home values and stock market prices in recent years along with reductions in debt have pushed up the net worth of households which also supports consumer spending. finally, interest rates for borrowers remain low due in part to the fomc's accommodative monetary policy and these have been relevant
for consumers considering the purchase of durable goods. other components of private domestic final purchases including residential and business investment have also advanced this year. indeed, gains in real residential investment spending have been faster so far this year than last year. the level of residential new construction remains fairly low. outside of the drilling and mining sector where lower oil prices have led to substantial cuts in outlays for new structures, business investment spending has posted moderate gains. turning to inflation, it continues to run below the fomc's longer run objective of 2%. overall consumer price inflation as measured by the change in the price index
the economy is likely headed over the next several years. to summarize, i anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment and a rise in inflation toward 2% objective. although the economic outlook is always as uncertain, i currently see the risk to the outlook for economic activity and the labor market as very close to balanced. regarding u.s. inflation, i anticipate that the drag due to the large declines in prices for crude oil and imports over the past year-and-a-half will diminish next year. with less downward pressure on inflation these factors and some upward pressure future tightening, i explect inflation to move up to the 2% objective
over the next few years. of course, inflation expectations play an important role in the inflation process and my forecast return to our 2% objective over the medium term relies on the judgment that longer term inflation expectations remain reasonably well anchored. let me now turn to the implications of the economic outlook for monetary policy. in the policy statement issued after its october meeting, the fomc reaffirmed its judgment that it would be appropriate to increase the target range for the federal funds range when we have seen further improvement in the labor market and we're reasonably confident that inflation would move back to the committee's 2% objective over the medium term. that initial rate increase would reflect the committee's judgment based on a range of
indicators that the economy would continue to grow at a pace sufficient to generate further labor market improvement and return of inflation to 2% even following the reduction in policy accommodations. as i've already noted, i currently judge the u.s. economic growth is likely to be sufficient over the next year or two to result in further improvement in the labor market. ongoing gains in the labor market, coupled with my judgment in a long term inflationary expectations remain reasonably well anchored, serve to bolster confidence in return of inflation to 2% as the disinflationary effects of decline and energy import prices wane. committee participants recognize that the future course of the economy is uncertain. and we take account of gotesdz
the upside and downside risks around our projections when judging the appropriate stance of monetary policy. in particular, recent monetary policy decisions have reflected our recognition that the federal funds rate near zero we can respond more readily to upside surprises to inflation, economic growth, and employment than to downside shocks. this asymmetry suggests that it's appropriate to be more cautious in raising our target tolt federal fund rate than would be the case of short term nominal interest rates were appreciateably above zero. reflecting these concerns we have maintained the current policy stance even as the labor market has improved appreciateably. however, we must also take into account the well-documented lags in the effect of monetary
policy. were the fomc to delay the start of policy normalization for too long we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. such an abrupt tightening would risk disrupting financial final markets and and push the economy into a recession. moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk taking d thus undermine financial stability. on balance, economic and financial information received since our october meeting has been consistent with our expectations of continue combd provement in the labor market. and as i've noted continuing improvement in the labor market helps strengthen our confidence
that inflation will move back to 2 prt objective over the medium term. that said, between today and the next fomc meeting we will receive additional data that bear on the economic outlook. this data includes the range of indicators include the labor market inflation and economic activity. when my colleagues and i meet we will assess all the available data and the implication to the outlook in making our policy decision. as you know, there has been considerable focus on the first increase in the federal funds rate after nearly 7 years in which that rate was added its effect of lower bounds. we have tried to be as clear as possible about the conversations that will affect that decision. of course, even after the initial increase in the federal funds rate monetary policy will
remain accommodative. and it bears emphasizing that what matters for the economic outlook are expectations concerning the path of the federal funds rate over time. it is those expectations that affect financial conditions and thereby influence spending and investment decisions. in this regard the committee anticipates that even after employment and inflation are near mandate consistent levels economic conditions made for some time warrent keeping the federal target funds rate below levels as normal in the longer run. so in closing let me say the economy has come a long way toward the fomc's objectives of maximum employment and price stability. when the committee begins to normalize the stance policy doing so will be a testament also to how far our economy has come in recovering from the
effects of the financial crisis and the great recession. in that sense it is a day that i expect we are all looking forward to. so thank you. let me stop there. i would be pleased to take the questions. >> it is a day we have long waited for and hopefully your positive remarks today will bear that out and set us on the right trend. a positive trend. as we had discussed earlier in private, i want to raise this n public, while our trends are moving toward positive territory, the eu's trends seem to be moving into negative territory with negative overnight interest and deposit ates, also additional thoughts about ways to stimulate the economy. they play a major role in the world economy.
we see slowdowns in china significant problems in brazil and throughout many emerging markets. my question is that clearly is the -- much of the world seems to be in a negative trends. how do you balance those two relative to their impact on each other and how does the fomc take that into conversation? >> thank you for that question. we have seen relatively weak growth in the global economy with different parts of the global economy faring differently. ut relatively weak growth. the u.s. has enjoyed stronger growth in labor market performance. that weak growth shows through to the demand for u.s. exports and it's one factor that has been depressing u.s. net
exports. in addition, that difference in strength between global economy and the u.s. and reflected also in different expectations about the path of monetary policy as ou noted the ecb has added stimulus, has taken additional actions today to provide further stimulus that there's expectation that the fomc is coming closer to raising rates. that difference in expectations about monetary policy reflecting different underlying strength has led over the last year-and-a-half to a substantial appreciation of the dollar. so the comnation of weak foreign growth and a strong dollar has both of those things have depressed our export growth and increased imports because imports are cheaper.
so that is a drag on the u.s. economy. but again, we have to remember that consumer spending business investment residential investment account for 85% of total spending. and domestic spending is on solid course. it's been growing around 3%. o the combination of solid domestic spending coupled with a drag from abroad that has been operatives and will continue to be operatives overall on balance that's led -- and i think it will continue to lead -- to growth that is somewhat above trend and on a continueing trend of labor market improvement. but of course it's highly relevant toward decisions and the strength of the dollar is one factor that puts -- means
that monetary policy for the u.s. is more likely to follow a gradual path. >> we also have global uncertaintyty relative to world security. we seem to be entering my time here where violence in one form or another, whether it's domestic or international or terrorist oriented or connected to other means, what -- you can lay awake at night thinking of scenarios where coordinated terrorist attacks or just accelerating for the kind of violence that we're seeing mass shootings and so on could have a negative effect and would have a negative effect on the economy relative to people's fear of spending going out enjoying sports, entertainment, other types of entertainment or going to malls and shopping et
cetera. to what -- how does that factor in to the if he had's thinking regarding -- fed's thinking regarding its impact on the economy? >> those risks are one that is we watch very carefully. and i would agree with you that it does have the potential to have a significant economic effect. i see a t say that significant effect at this point although certainly in the aftermath of the financial crisis we have seen rather cautious behavior on the part of households and firms. and while i think there are many different factors that contribute to that cautious behavior, the crisis itself, the slow growth we've seen many businesses talk about regulatory's uncertainty, i would add geopolitical risks as a further factor that is causing that kind of
cautiousness. >> thank you. my time has expired. so i can show good example to my colleagues in terms of implementing the five-minute rule i will call on our ranking member. >> thank you so much. thank you so much chair yellen. in the speech you gave yesterday at the economic club of washington, you said, many fomc participants indicated in september that they anticipated in light of their economic forecast at the time that it would be appropriate to raise the target range for the federal funds rate by the end of the year. what are the longer term trends that you give -- that would give you the most pause when off? ing the timing of lift for example how would you assess tomorrow's jobs number in the context of its long-term
trend? >> well, i think the two things that we focus on most in our evaluation are economic development that is affect the labor market and also those that affect inflation. because our congressional mandate calls for us to achieve maximum employment and price stability. and therefore, in my testimony try to indicate that i do see their ups and downs every series is noisy. we will be looking of course carefully at tomorrow's jobs report. what we're looking to see is a continued solid trend of job creation that while we're close to full employment and maximum
employment at least to my mind remains margins of slack in the labor market part time involuntary employment is remains too high. labor force participation is on the decline trend. but nevertheless, i think it is to some extent depress bid the fact that the job market hasn't been stronger. so we want to see the economy being on the path where it will continue to erode that labor market slack over time. so we will be looking very carefully at that. ut we can't overweight any particular number. we need to be looking at underlying trend and the data and not overwaiting any number. inflation is also clearly very important. we articulated several years go that the committee has a 2%
inflation objective. inflation has been running significantly below that for some time. just as we don't want to see persistent inflation above our objective, we also don't want to see persistent inflation below our 2% objective. so as i discussed, we are i think much of it is transitory but we will be looking at data to see if our expectation that it's going to move up over time will be realized. and those are key pieces. >> chair yellen, two weeks ago the house passed legislation that would interfere with the feds' operations in numerous ways. you wrote a sharply worded let tore congressional leadership expressing your opposition to the bill and i request unanimous consent to place that letter in the record. >> without objection we will do
that. >> and you said that it would severely damage the u.s. economy were it to become law. could you describe why you believe that this legislation would be so damaging to the independence of the fed? >> thank you. just briefly. this legislation would force the fed to set monetary policy according to a simple rule something called the taylor rule or a variant of it that would tie short-term interest rates to only two economic variables. the current level of inflation and the current level of output. and while such rules are useful as reference points and thinking about monetary policy, to set the federal funds rate in that way without deeper analysis of what's appropriate to the economy would be extremely damaging.
at this point that rule would call for a federal funds rate well over 2%. and while we might be close to the point at which we should be raising it boof zero, i think that if we were to follow that rule it would be damaging. but maybe more important, i want to say that this is an approach to monetary policy that sirly threatens the independence of the federal reserve in making decisions free of short-term political pressures in the best long-run interests of the economy it would subject us to regular g.a.o. audits of our monltry policy decision making in a way that congress has decided repeatedly and over many years it is wise to insulate the operational decisions of the federal reserve from those short-term political pressures. nd i believe that almost all
countries around the world have independent central banks. they have recognized it leads to stronger economic performance. and i believe this would be a step in interfering with the independence of the federal reserve in conducting monetary policy. >> thank you. my time has expired. >> we thank you. i understand that you have a eries of votes in the house. senator klobuchar. >> thank you very much. thank you for being here. i have my first question actually is about income inequality and we have done studies on this when i was the ranking member of this committee. i know you've written extensively on trends. what do you see as the impact and what do you think could be done to reverse the trend?
>> so i do think there is very disturbing trend towards rising income inequality in this country. economists have looked carefully at many different factors that might be responsible for it. and these are factors that are not recent. they've been in operation at least since the early or mid 80s two that stand out are first that tech lonlcal change has been biased in the direction of increasing the demand for skilled labor and diminishing the demand for less skilled labor and particularly people who engage in rather routine jobs that can be computerized. so technical change. and globalization also appears to have played a role in reducing the number of jobs
especially in middle income jobs that can be outsourced. so i think those are key factors. there are others that people have studied. so let me just make clear that these trends are not ones that the federal reserve can address. the best contribution we can make is to try to achieve our goals and particularly maximum employment at job market where people who want to work can find jobs using their skills. but there are many things that congress could consider. the return to education the gap between high and low skilled people is very high. and so policies that enable individuals to get appropriate education and training i think those are important. there are many things i think that congress could do that
would make positive -- this is on policy. >> it is on. >> we are trying to do the best we can. >> i agree. shifting here we have a lot of -- you and vi talked about this community banks in our states we know we are losing a number of them. consolidation. dodd-frank which i strongly supported has protected consumers. but we know from many of the smaller banks it's been hard to do the increasing work with complexity. any ideas of what we've been doing there? we don't want the smaller players to be eaton up. >> so i think that small community banks really are suffering from regulatory overload. and i think it behooves us to focus carefully on what we can do to try to diminish those
burdens. let me say that we recognize how high the burdens are on community banks and for our own part we are heavily focused on trying to taylor our regulations so that it's appropriate and we are looking carefully for ways that we can make life better for community banks especially those well managed and have adequate capital. we have raised the threshhold der our small bank holding company policy so that banks under a billion dollars aren't subject, the holding companies aren't subject to our capital requirements. we're trying to do more of our supervisery work off site and to target our exams toward risk areas. we are engaged with other agencies in the so-called gripper process in which we're
holding hearings and trying to identify things that we can do to reduce regulatory burden. we will be reporting to congress and i am sure that there will be a number of things that come out of that review that will enable us to take steps that will be helpful. but i do recognize there are significant burdens and i think it behooves us to address them. >> thank you. i am going to put two other questions on the record. one is an issue that is getting a lot of attention that's the $50 billion asset threshhold and your views if that could be modified with the siffi issue and maybe someone else will ask it. the second issue is your views on -- i'm a strong supporter of the infrastructure bill that we are about to vote on today but i would imagine you might have concerns on how some of this was paid for, wasn't exactly a set aside proposal. but that might affect the federal reserve. one of my colleagues can answer
that question. but i will in any case put it on the record. so thank you. appreciate that. thank you. >> i'm going to exercise a little bit of discretion here. i know that is -- >> that's great. >> a number of our minds here. just for those who understand the issue here. we are about to pass a highway bill which is long needed. but part of the pay-for is comes from your bank at the fed. the word is that there's plenty of profit sloshing around there that eventually is going to come back to the treasury anyway so why don't we take some now as an early withdrawal. >> i appreciate the opportunity to respond. so the highway bill as i understand it will take a large share of our operating surplus, which is part of the federal reserve capital to pay for this
bill and not allow us to build it up. this concerns me. ink financing federal fiscal spending by tapping the resources of the federal reserve sets bad precedent and impings on the independence of the central bank. it weakens fiscal discipline. and i would point out that repurposing the federal reserve capital surplus doesn't actually create any none money for the federal government. if you don't mind my quoting what cbo wrote in scoring this bill they said as follows. it's important to noted that the transfer of surplus funds from the federal reserve to the treasury has no import for the fiscal status of the federal government although federal budget accounting does not recognize additions to the federal reserve surplus account, as revenues, such
additions have the same effects as if they had instead been paid to the treasury and were counted as revenues. transfer of those funds would have no effect on national savings, economic growth or income. so in effect by taking our surplus we -- our holdings of u.s. treasury securities declines and the interest we would earn on those securities would be money that would be transferred every year for many years to come back to the federal covers. and by taking the surplus now, you are diminishing the stream of revenues into the federal budget over many years. now, a central bank differs from a commercial bank and the role of capital is somewhat different. but almost all central banks do hold some capital and operating
surplus. and holding such a surplus or capital is something that i believe enhances the credibility and confidence in the central bank. and so on those grounds as well our policy we don't have a lot of capital but we have long had capital and surplus that i think creates confidence in our ability to manage monetary policy. >> well, thank you. i think it was important to get an answer to that question. it's so relevant right now. >> thank you. >> there is a narrative that this is easy money. i think you've given us a pretty good response to that question. >> we appreciate it. >> thank you very much. >> senator cassidy. >> madam chair, thank you for being here. i share -- so seguing off of senator klobuchar's questions of income inequality you talked bout those working involuntary
part time. we have also looked at this. effect ed that this does not fall on all but on the tile. pers most have returned in terms of the average number of hours per week except the bottom is the one which is still lagging way behind. no dispute there, i'm sure. i think it's your data. so i'm guessing you'll agree with it. and my concern is that the cbo did a study pointing out the margele tax rate that the affordable care act essentially puts a marginal tax rate upon the employer providing employment. if someone is working full time obviously you've got to pay more to give them insurance and that effects the lowest quinn
tile. would you agree with that? >> well, so i take it the data that you presented is i want resting. interesting. >> not in that lowest quinn tile. that data which is from the bureau of labor stants sticks shows that it persists. >> it does. but it's diminished. >> relatively speaking but still far greater than this
point of previous recoveries. >> i think it is disproportionately high. >> sorry to interrupt. he is going to hold me in five minutes. i am looking at something from 2013 that suggests that rising costs for health benefits may prompt employers to shift towards part-time work to hold labor costs down. perhaps intensify -- >> medium sized and large emplorse provide health benefits et cetera. intuletively, if the cost of health benefits is added to the wages paid as total compensation, the marginal effect of increasing the cost for health benefits for the lower quinn tile is going to be greater than the marginal effects. so i'm just curious that as much as you've looked at this that's not something that you've noted. i will move on if you say i haven't. but i would appreciate any
further thoughts. >> i am not aware of any estimates of the size of it. most significant size employers have covered and continued to cover their workers. so there's been a lot of discussion of this. i have not seen a study to show. >> let me return to something you said earlier. you implied that the dollar will weaken over the coming year because you said that both the price of oil would begin to rise. >> i didn't mean to make a forecast about i don't believe i did. i didn't make a forecast. >> in term of the inflationary pressure, you said that the downward effect will be eased because of the decline to return to the norm of both. >> when the dollar appreciates while it's moving up that tends to push prices down which cuts inflation. but if the dollar simply
stabilizes at the new higher level then inflation is no longer held down. so simply stabilizing the value of the dollar stabilizing at a new higher level. >> let me ask. >> would diminish that effect. >> it still seems to me that our manufacturing is going to be negatively impacted. aror that is true. i think the strong dollar has been one of the factors. >> if the e nch cb is planning to stimulate and we are sending signals we're going to raise interest rate. the dollar will strengthen. >> the dollar has strengthened over the last year-and-a-half. >> but you anticipate that plateauing or continuing? because if it continues you mention houd the downward pressure on inflation eases once stabilized but if they are
stimulating and we are raising rates it suggests that it might continue to rise. >> i believe much of that expectation is already built into the market and into exchange rates. so i think that that explains importantly why the dollar has risen as much as it has. i wouldn't forecast -- i wouldn't forecast where the dollar is heading. >> i yield back. > i note it had euro rose. perhaps the thinking was that they were taking the right path to get the economy to a better position. i don't know if you want to remark on that. but i just thought that was -- i fully expect the dollar to strengthen this morning against
the euro based on what the ecb did. >> just watching a little bit of this morning's events my understanding is that the market expected some actions that were not forth coming. >> that's always been the problem with the market. we can never predict what it's going to do. > chair yellen, welcome again. i want to return to the line of questioning that they had u touched on with infrastructure in particular. and i want to thank you for very diplomatically describing why it's a bad idea to pay for things in this way. i might be less diplomatic in my characterization of those types of pay-fors. but i think it's very important that we in our efforts to pay for things as important as infrastructure have honest payments. one of the changes made along
the way had to do with the exception of community banks from that sort of structure. at this point fed member banks with assets less than $10 million will be accepted in the changes in the fed share dividend rate. community banks in new mexico depend on fed share for solid investment. i've been very vocal about how misguided it is to ask community institutions to finance infrastructure. do you have any thoughts on what the impact could have been especially given your previous comments today on the regulatory burden on the institutions had that change ot been made to the pay-for. >> obviously there would have been a burden, something that worried me is that it might
affect the incentives of many of those institutions to be members of the federal reserve to be members of the fed system. and i thought that was something that before one makes a change of that significant it's wise to think through more fully. >> do you think it would have y impact on their ability to -- on the decision making in terms of lending to small businesses that are on the margin plan? >> that's difficult for me to say. learly there is a tax in that. i don't know how significant that would be to leppeding decisions. >> shifting gears a little bit by just going back to interest rates by potentially raising interest rates the fed would endorse the idea that our
economy is on a stable path towards full recovery. i'm interested in how this potential action may signal improving conditions for job creation in states like my own. especially given the fact that new mexico and a number of other states have not experienced the same economic recovery as the country as a whole has. do you have thoughts obthat? >> there certainly are differences between states and how much in terms of the recovery has aided employment. my expectation going forward is the labor market and the economy will continue, the labor market will continue to improve. and eventually i think all states will see improvements as that occurs. but of course the exact industrial structure of a state can matter. but there probably have been
improvements substantial improvements and i think the labor market will continue to improve over time. so returning to an issue a number of my colleagues have raised. just generally when you're looking at a situation where the fomc is looking at increasing interest rates but the actions of other central banks around the world are in a counterveiling direction. how do you overall factor in the actions of those other central banks into the broad picture and how does that impact your decision making as to whether or not it is the ight time to move forward? so we are trying to assess the outlook and we need to factor in all the different elements
that determine that. our success in selling goods tolt rest of the world and the strength of our imports. that's an important determine nant of the outlook. divergent have monetary policies globally it often means that there will be exchange rate movements that accompany that. we have seen that over the last year-and-a-half. and as i said, the combination plus weak growth abroad the movement of the dollar has been a subtraction from growth and i think it will continue to be going forward. so that's a negative. and of course it's something that makes us much more cautious in terms of raising rates. but still 85% of spending on u.s. goods and services comes
from consumers investment spending housing. and very good fundamental reasons there's greater strength there. o when we put it all together, e're still seeing a picture on trend growth. there are risks that come from the global environment that we ave monitored carefully. and recognize. but overall i would say that the total while there's this foreign weakness overall we're on a solid course. > thank you. >> senator peters. >> thank you for your testimony here today and the wonderful work that you do. i want to pick up on some of the comments you made on income
inequality. i realize that the fed doesn't have the ability to alter that but certainly you have to respond to that in terms of your policy making and the effectiveness of how your policy may be given some i think some significant structural change thars occurring in our economy as a result of the fact that the vast majority of people have not seen increases of wages. middle class has been stagnant. seems to be a disconnect the theory i remember years ago that normally when you have increases in productivity that translates into higher wage levels. we have not seen that. in fact in recent years we have seen from what productivity has gone up significantly more than wage levels. and if you're looking at formulating monetary policy you're looking at aggregate demand and how to get that demand is income in the economy and wages. you mentioned that consumers are 80 plus percent of it so
the more money that consumers have the stronger the economy is. and yet if it is not growing, from wages, it has to grow from them taking on debt. if we look at the fact that wages have been stagnant and that actually in recent years as well i believe we are seeing consumers are starting to deleverage which is a different trend what we saw before, we don't have those engines of growth. in your testimony you said there's a 3% increase. but i believe that is down where we saw 3-1/2 or more in consumer spending which led to higher g.d.p. growth. we're seeing this long term many year trend of lower wages, deleveraging of debt and the fact that most of all the economic gains are only going to the very top of the income ladder and the folks at the very top don't spend as much consumerwise as folks in the
middle class there may be more resources available for investment and other types of uses of that cash. but how do you see this long term trend of income inequality? to s that going to impact be as effective as it may have been in the past when those things were in balance a lot more than we're seeing right now? >> that's a great question. and you introduced a lot of different elements into it. in income trends and having our disposable income for house holds are one of the most important factors determining consumer spending. and the fact that wages have been pretty stagnant for a number of years i guess compensation's been growing in the 2 osh 2-1/2% range. at is something we've had to
take account of in forecasting what the strength of the overall economy has been and it's integral to our forecast. t i guess i would say that job growth has been pretty solid for a number of years. so disposable income in spite of the fact that wage growth has remained in that 2, 2-1/2% range, there's been a lot of job growth that's added to disposable income. so the saving rate moved up after the financial crisis. and it remains in positive territory and has been pretty stable. so the consumer spending we're seeing isn't largely being supported by taking on additional debt. it is being supported by income that households are earning. as the economy progresses, as
the labor market strengthens further, i would expect to see upward pressure on wage growth. recently in measures of hourly compensation and average hourly earnings i think we've seen some welcomed hints. it's tentative evidence. we don't know if it will last. but at least recent data does suggest some upward movement in wage increases. but over the last couple of years the spending we've seen has been supported by income growth. inequality definitely plays a role here. and of course we need to see sufficient where withal for households to spend in a way that generates forecast of continuing growth. >> thank you. >> senator casey. >> mr. chairman, thank you. madam chair, we're grateful for
your testimony today. your presence and your public service. i will have just one question i will submit a second from the record because of the limitations on time we have today and we have in the senate as well. that i was irst heartened in your testimony that we all have heard, i guess here, there, but we don't emphasize enough. the statement you made the economy has created about 13 million jobs since the low point for employment in early 2010. that's good news. good news on the unemployment rate itself which as you note peaked at 10% in october 2009, declined 5% october this year. so literally cut in half. that's good news. we should emphasize that as we highlight or itemize some of the challenges with labor force
participation rate or folks not -- folks really discouraged from seeking employment. the question i have is more long term one question about steps that we should be taking and steps that you might recommend for long term competitiveness. one of the policy steps that i hope we could take and we had a step in the right direction on early learning. a couple month ago when we voted in connection with an education bill on an amendment that was my amendment. which was the first time in a decade really where the senate was on record voting on a substantial early learning commitment for the country. just to summarize it if every state signed up -- it would be optional but if every state participated we could have provided early learning to 3 million children at 2% of the poverty level and lower.
so it's substantial. we didn't win. we didn't prevail on that vote but it was good to have a clarifying sense of where people stood. but i guess just my basic question is that. what would you hope we could do on taking steps on long-term investments in a more competitive workforce? >> so let me say i think that one of the most disappointing aspects of u.s. economic performance is that the pace of growth and the pace of productivity growth have been very depressed. they fall in very substantially from what we saw in precrisis times. now the good side of it is it hasn't taken much growth to see substantial improvement in the labor market. the bad way to read that com plex of facts namely not a lot
of growth, quite a lot of jobs is the productivity growth has been very slow. and ultimately long term living standards, how well our children will do and whether or not they will have better lives than we have really do depend on productivity growth and thinking then i would say that congress should put considerable attention into thinking about policies that could serve to speed the productivity growth and the economy and education is one of the thing that is would head my list. the fact that we have seen such a large gap between the wages of more educated and less educated workers, that is a signal that there is a high return to investment in education. and making it more available.
i know there are studies with many studies with respect to early childhood education that have particularly pointed to the importance of that in creating skills and better performance. but at all levels at all levels education is important. in addition to that i would say it's well documented that support for basic research and development is an important foundation for economic growth and i would say policies to make entrepreneurship easier and to encourage it. all of those are the kinds of things that are important to trends in economic growth. >> thank you very much. thank you, mr. chairman. i am told the house of representatives may be wrapping up its voting. and members may be coming back. with that gives us a little more time here.
we know you have a cutoff time and we will make sure we hit that. but if you are willing to stay a bit to see if members come back. i know that senator cassidy would like to -- speaking of coming back. >> yes. >> thank you. you're up. >> ok. good timing indeed. thank you chair yellen for the clarity of your testimony. but more importantly for your incomparable leadership in the federal reserve during this obviously particularly important time. i wanted to focus on your view as to the effect higher interest rates or, let's say differently, the first step towards raising rates borrowing . the conventional wisdom is that lower interest rates encourages more borrowing because credit costs are cheaper.
but we've had interest rates of such unusually low levels for such a sustained period of time that that's obviously been a bit of an anomaly in terms of historical rate patterns. d i wondered if that has psychologically changed people's perspective on borrowing. d if a return to a view that things are more normal -- which is what i think many people interpret an increase in rates would certainly signal. at the levels we're at now, modest increase in rates will have largely an inconsequential effect on debt service coverage. and the free option that people borrowers have had, you talked about how corporate investment is kind of moderate. new home construction is still below standard or below where you would like it to be. so you worry that a lot of
those decision makers have viewed zero interest rates as a free option. i don't have to do anything because they are so low. so i guess my question is, as you look at a day when rates do go up -- because that day will occur. we were very clear about that. exactly when none of us know yet of course. but do you think that will encourage more credit formation, more borrowing chsh which i think will be good for the economy. because some of these -- the people will start looking at rates differently. >> so a few things i would like to say. when the fed takes its initial step in raising the target for the federal tunds rate, it's important to understand that doesn't mean that there is some predetermined path back to historicically normal rates. >> i understand.
>> so the notion that it should be something that will be gradual. >> i mean, in general, higher levels of i want rest rates i think do tend to -- int rhett rates do tend to make borrowing more expensive and discourage it. but it will occur in the context of a stronger economy, with higher income where people are doing better. it's not the only thing that affects investment decisions or borrowing or spending decisions. so i would not expect to see borrowing go down or lending go down when we raise rates modestly. >> you think it might encourage more borrowing? >> well, one does often hear, especially anecdotal evidence that i hear along the lines that you're suggesting, that there are people who do feel, i have an option. rates will stay low for a long time.
and if they see rates going up, there may be people who are on the fence who may decide now is the hour to act. so that is -- that wouldn't surprise you as an outcome. >> it wouldn't surprise me as an outcome. but it -- that's a temporary effect. >> and you're not -- >> in a way borrowing from the future. so i don't want to encourage the idea that i believe that higher rates in and of themselves would permanently tend to boost borrowing and spending. >> one other quick question. if i can. switching gears. governor carney gave a speech where he talked about one of the long term risks to the market is climate change. potentially the reinsurance industry related to weather. do you share some of those concerns? i know you don't have much time. >> i thought it was an
extremely interesting speech. i cannot say that i am aware of work that we have done looking at that. but i think it's something that is worth certainly worth considering. >> do you think you will be doing some work in that area? >> i will -- it's something we can get back to you on and have a look on. >> thank you. >> thank you. senator cruz. >> thank you. welcome. in the summer of 2008, responding to rise in consumer prices, the federal reserve told market that is it was shifting to a tighter monetary policy. this in turn set off a scramble for cash. which caused the dollar to soar cpi to to collapse and fall below zero which set the stage for the financial crisis. n his recent memoir former fed
chairman ben bernanke said that the decision not to ease monetary policy at the eptember 2008 fomc meeting was in retrospect certainly a mistake. do you agree with chairman bernanke that the fed should have eased in september of 2008 or earlier? >> if you're talking about 2008 or 2007? >> 2008. i mean, i think the fed responded pretty promptly in easing monetary policy to the pressures that were emerging. and, i mean, i don't disagree about with his analysis of a particular decision. but i certainly wouldn't say that that decision is what
caused the financial crisis. d by december of 2008, the federal funds rate has been lowered to zero. >> so when you say you don't disagree, does that mean you agree with chairman bernanke that it was a mistake? >> so i can't recall the exact passage that you're referring to. so before i say if i would agree, i would like to have a chance to review exactly what he said. >> well, i would be very interested if you would have the opportunity to review the passage and let the committee know whether you agree with his assessment. >> ok. >> i want to shift to a different fed chairman which is paul volker. who said in the speech before the committee last year, by now i think we can agree that the absence of an official rules based cooperatetively managed monetary system has not been a great success. in fact, international financial crises seem at least
as frequent and more destructive in impeding economic stability and growth. chairman voker went on to say, the united states in particular had in the 1907s an unhappy decade of inflation ending in stag flation, the major latin american debt crisis followed in the 1980s. there was a serious banking crisis followed by a new mexican crisis. and then the really big and damaging asian crisis. less than a decade later it was capped by the financial crisis of the 2007 through 2009 period and the great recession. not a pretty picture. now, you have said it would be a grave mistake for the fed to commit to conduct monetary policy according to a math matcal rule. do you agree with chairman voker's characterization that
the absence of an official rules based cooperatively managed monetary system has not been a great success and not been a pretty picture? >> well, you have pointed to a large number of very damaging financial crises. and this that sense, i do believe it was very important r us to take steps to have a stronger financial system and one that's less crisis prone. i don't think that former chairman voker was proposing a rules based monetary policy in the sense of following a simple mechanical rule. and i guess i would argue that many countries do have in essence the rules-based monetary policy in the sense that most countries have inflation targeting regimes. and transparent monetary
policies where the central banks are independent and spell out and are accountable to achieve an inflation objective. and the federal reserve has very much strengthened its transparency as to what our goals are, what our strategy is for trying to achieve those goals. and provided the public with very detailed forecast of what policies we think are appropriate to achieve the goals that congress is assigned to us, including a 2% inflation objective. and over the last 20 years inflation has been highly stable around 2%. so in that sense even though we may not follow the rule or some simple math matcal formula, i believe we do have a rules-based monetary policy in
the united states. or at least a systemic policy in the united states and many other countries, most other countries do as well. >> and one final question. n 2008, the fed began paying interest on reserves. in the seven years since then do you know how much janet yellen: it has been set at 25 basis points. i don't have the exact numbers. . i want to say it is a critically important tool of monetary policy. alls a tool that almost advanced countries, central and rely on as a key tool of monetary policy.